Beauts
Rock and roll will never die
I don't think the redeads were the people of Castle Town. You see quite a few survivors of castle town throughout Hyrule as an adult. Anyone else you can assume just didn't survive. Whether Ganondorf or someone else created redeads or not, I kind of equate them similarly to the Dementors in Harry Potter; they suck the life out of the people around them, (dementors technically suck out your soul not your life but still), and they thrive in places where there has been a lot of bloodshed or darkness. Which is why you see them in the town which was clearly destroyed when Ganondorf took over, in the Shadow Temple and Bottom of the Well, and not in places that are more unscathed (Kakariko Village itself doesn't have redeads roaming, neither does Lake Hylia or Goron City). I think they breed or appear somehow in places associated with death and bloodshed. I don't think they are dead people or anything like that. I wouldn't take Smash too seriously, but if they are made of clay maybe we can assume they were created for the above purpose.